StubHub was hit with a class action lawsuit this week after it was revealed that CEO Eric Baker has spent the last several decades running a professional ticket reseller on the platform, as well as a company that helps finance other scalpers.
According to StubHub’s SEC filings, Baker is a part-owner and managing director at Andro Capital, a hedge fund that profits from buying and selling tickets on the secondary market. Baker is also connected to Colloquy Capital, an affiliate of Andro, which provides working capital for other resellers to buy/sell more tickets.
Here’s what we know so far:
Eric Baker is the co-founder and CEO of StubHub
Baker also owns a hedge fund named Andro Capital
Andro Capital makes money buying and selling tickets
Andro Capital has sold millions of dollars of tickets on StubHub
Andro Capital was given preferential treatment (think: lower/no fees)
Andro Capital also owns a financing firm called Colloquy Capital
Colloquy Capital provides other scalpers with working capital
Colloquy’s working capital helps scalpers buy/sell more tickets
StubHub referred potential clients to Colloquy for financing
StubHub paid Colloquy a percentage of client proceeds on the platform
Baker’s relationship with Andro Capital and its affiliate, Colloquy Capital, was disclosed in StubHub’s SEC filing when the company went public last year. But the average customer would never have known about it because it was buried 185 pages into the disclosure, and it only came to light when a class action lawsuit was filed in the Southern District of New York against StubHub and Baker.
The class action lawsuit essentially argues that customers viewed StubHub as a “neutral” marketplace that matches buyers and sellers, and that if customers had known about Baker’s relationship with Andro/Colloquy, they would never have used the platform (because that relationship ultimately drives ticket prices higher).
We’ll let the courts decide whether that lawsuit has any merit, but at the very least, this is a massive conflict of interest. StubHub presents itself as a neutral intermediary. Independent sellers set the ticket prices; they simply provide the technology and transaction infrastructure to make buying and selling seamless.
StubHub has publicly claimed “99% of sellers are fan sellers” and “94% sell fewer than 10 tickets per year.” But industry researchers estimate that mass scalpers typically account for as much as 70% to 80% of inventory on major secondary platforms, and both of those StubHub stats can be true if a very small number of high-volume sellers account for a disproportionate share of ticket volume. That’s just a fancy way of saying less than 1% of sellers list the majority of the tickets.
This is where Andro Capital and Colloquy Capital come into play.